Magat, Jr. v. CA 337 s 298

Magat, Jr. v. CA
GR 124221
Private respondent Santiago A. Guerrero (hereinafter referred to as "Guerrero") was President and Chairman of[4]“Guerrero Transport Services", a single proprietorship.

Sometime in 1972, Guerrero Transport Services won a bid for the operation of a fleet of taxicabs within the Subic Naval Base, in Olongapo. As highest bidder, Guerrero was to "provide radio-controlled taxi service within the U. S. Naval Base, Subic Bay, utilizing as demand requires... 160 operational taxis consisting of four wheel, four-door, four passenger, radio controlled, meter controlled, sedans, not more than one year..."

With the advent of martial law, President Ferdinand E. Marcos issued Letter of Instruction No. 1 (hereinafter referred to as "the LOI"): SEIZURE AND CONTROL OF ALL PRIVATELY OWNED NEWSPAPERS, MAGAZINES, RADIO AND TELEVISION FACILITIES AND ALL OTHERMEDIA OF COMMUNICATION, ordering to take over and control or cause the taking over and control of all such newspapers, magazines, radio and television facilities and all other media of communications, wherever they are, for the duration of the present national emergency, or until otherwise ordered by me or by my duly designated representative.

Pursuant to the LOI, Radio Control Office issued Administrative Circular No.4: SUSPENDING THE ACCEPTANCE AND PROCESSING OF APPLICATIONS FOR RADIO STATION CONSTRUCTION PERMITS AND FOR PERMITS TO OWN AND/OR POSSESS RADIO TRANSMITTERS OR TRANSCEIVERS, suspending the acceptance and processing by the radio control office of applications for radio stations constructions permits and for permits to possess, own, transfer, purchase and sale of radio transmitters and transreceivers as well as manufacturers and dealer’s permits of said equipment.

Guerrero and petitioner Victorino D. Magat (hereinafter referred to as Victorino), as General Manager of Spectrum Electronic Laboratories, a single proprietorship, executed a letter-contract for the purchase of transceivers. Victorino was to deliver the transceivers within 60 to 90 days after receiving notice from Guerrero of the assigned radio frequency, "taking note of Government Regulations."Victorino contacted his Japanese supplier and ordered for the transceivers.

The Navy Exchange Officer confirmed that Guerrero won the bid for the commercial transportation contract. Middle man and broker Aligada advised Victorino Magat "proceed with the order upon receipt of letter of credit.

Guerrero applied for a letter of credit with the Metropolitan Bank and Trust Company.[15] This application was not pursued.

Victorino, represented by his lawyer, Atty. Sinesio S. Vergara, informed Guererro that the order with the Japanese supplier has not been canceled. Should the contract be canceled, the Japanese firm would forfeit 30% of the deposit and charge a cancellation fee in an amount not yet known, Guerrero to bear the loss. Further, should the contract be canceled, Victorino would demand an additional amount equivalent to 10% of the contract price.

Unable to get a letter of credit from the Central Bank due to the refusal of the Philippine government[18] to issue a permit to import the transceivers,[19] Guerrero commenced operation of the taxi cabs within Subic Naval Base, using radio units borrowed from the U.S. government (through the Subic Naval Base authorities).[20] Victorino thus canceled his order with his Japanese supplier. Victorino Magat filed with RTC a complaint for damages arising from breach of contract against Guerrero.

ISSUE/ Ruling:

1.       Whether the contract between Victorino and Guerrero for the purchase of radio transceivers was void.
The contract was valid; the radio transceivers were not contraband. Nowhere in the LOI and Admin. Circular is there an express ban on the importation of transceivers.
"Contraband" generally refers to "any property which is unlawful to produce or possess." It refers to goods which are exported and imported into a country against its laws.
Therefore, possession and importation of the radio transmitters and transceivers was legal provided one had the necessary license for it.[42] Transceivers were not prohibited but merely regulated goods. The LOI and Administrative Circular did not render the transceivers outside the commerce of man. They were valid objects of the contract.[43]
2.       Whether the contract was breached.
The law provides that "[w]hen the service (required by the contract) has become so manifestly beyond the contemplation of the parties, the obligor may also be released therefrom, in whole or in part."[46] Here, Guerrero's inability to secure a letter of credit and to comply with his obligation was a direct consequence of the denial of the permit to import. For this, Guerrero cannot be faulted.
Even if we assume that there was a breach of contract, damages cannot be awarded. Damnum absque injuria. There was no bad faith. No moral damages and no exemplary damages. either can actual damages be awarded. True, indemnification for damages contemplates not only actual loss suffered(damnum emergens) but unrealized profits (lucrum cessans) as well.[53] However, to be entitled to adequate compensation for pecuniary loss, the loss must be actually suffered and duly proved.[54] To recover actual damages, the amount of loss must not only be capable of proof, but must be proven with a reasonable degree of certainty.  The claim must be premised upon competent proof or upon the best evidence obtainable,[55] such as receipts[56] or other documentary proof. There was none.

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